The short answer to that question is NO. The long answer is that some real estate investments are safer than others.
How does one tell the difference? In an atmosphere of stock market volatility, rising interest rates and global trade tensions, look for scarcity in the market, location and plot size to help insulate the properties you are considering from market changes.
Richard Green the director of University of Southern California’s Lusk Center for Real Estate in Los Angeles, said, “No class of real estate is immune to recessions.” But, Green went on to say, “Some are better than others.”
Lusk recommends that investors look for
- Multifamily homes that bring the owner rental income
- Properties in high demand, low supply locations
- Homes that were designed by experts with tremendous attention to detail.
According to Mark Herbert, co-founder of Boulder-Vancouver based PowerPlay Destinations, a sales and marketing company specializing in vacation homes, said, “It’s a question of, what can I buy that is not going to kill me from a depreciation standpoint?”
Interestingly, vacation homes are often the hardest hit during recessions. During 2008’s Great Recession, sales of vacation homes fell over 30% compared with 2007 and prices decreased +23%.
Jonathan Miller, president of appraiser Miller Samuel, said that he views vacation homes as a more vulnerable asset class during recessions, however, rental income from vacation homes can provide some insulation. A recent survey of vacation homeowners by Savills and HomeAway found that the average annual income was $21,000 in 2018 and that in places such as Jackson Hole WY, where 97% of the land is protected by land conservancies and/or forest (and no state income tax), vacation homes do not depreciate.
Duplex and triplex properties can, in addition to the lure of rental income, sometimes mean certain tax breaks and more lenient financing. BUT, in addition to checking with your tax advisor, make sure to look out for post recession development boons such as the one New York City is currently experiencing. According to Douglas Elliman Realty’s December 2018 Rental Market Report, new leases fell -38.5% compared to December 2017.
Tami Pardee, CEO of Halton Pardee and Partners, is bullish on properties with great accessibility, lot size and “soulfulness.” “Properties in specific, walkable neighborhoods are perpetually in demand…people wait for those house to come onto the market” because “…the more land you have, the better off you are and you can build.”
Sally Forster Jones, executive director of luxury estates with Compass in Los Angeles, takes the long view of real estate investment. “The most important thing is to look at real estate and know that in the long run, it is cyclical. If you can just wait it out, it’s going to turn out fine in the end.”
